Larsen & Toubro Ltd. (L&T) on Tuesday said it had signed a non-binding term sheet with Italy’s Generali Group and Kishore Biyani’s Future Group to merge its 100 per cent subsidiary L&T General Insurance Company Ltd. (LTGI) with Future Generali India Insurance Ltd. (FGI) so as to acquire 51 per cent stake in FGI post-merger.

Rs.500-crore deal

The deal is estimated to cost L&T Rs.500 crore, according to people having direct knowledge of the takeover bid.

“On completion of the merger, L&T and Generali would acquire such number of shares as would result in L&T having a 51 per cent stake, Generali having a 26 per cent shareholding and the balance to be held by Future Group in the merged entity,” L&T said in a statement.

The completion of the transaction is subject to satisfactory due diligence by both parties and requisite approvals from the Insurance Regulatory and Development Authority (IRDA) and other regulators. Started in 2010, LTGI achieved a gross written premium (GWP) of Rs.118 crore for the nine months ended December, 2012. It has 15 branches and has cumulatively issued more than 150,000 policies.

FGI is a 74:26 joint venture between Future Group and Generali Group. The company achieved a GWP of Rs.855 crore for the nine months ended December, 2012. It has issued over 840,000 policies and has settled over 100,000 claims in financial year 2013. It has 83 offices with over 5,900 agents.

Stocks plunge

Following the announcement, the L&T stock plunged to close with a loss of 2.24 per cent at Rs.1,337 on the BSE. However, Future Group’s Pantaloon Retail gained 0.40 per cent to close at Rs.112.85.

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